First Time Buyer through shared ownership

meganross

Hi

I really need some advice as i don't know what to do with today's market not looking great!!

My partner and i have just been offered 80% of a property through a shared ownership scheme. We don't have to rent the other 20%. The property is worth £138000 and we will borrow about £107000. We have contacted an independant mortgage advisor who has said he has found us a deal through nationwide. We have no savings between us so no deposit.

I am just beginning to worry whether now is the right time to buying somewhere?!?! We are renting in my boyfriend's sisters flat just now and its only costing £310 per month!!!

Should we hold off and wait and see what happens or should we just get on the property market?? I am 26 and he is 28 and we just think we should get our foot on the ladder!! OR should we take the property and live there for 2 yrs then sell?? We can only ever own 80%.

Sorry a bit long winded but im very confused about what the right thing to do just now is!!!

zippygeorgeandben

Hi Megan,

Welcome to the board.

You state you have been offered 80% of the property. I'm guessing that you made the first move, i.e. showed interest in this particular house. Can i ask if it is a house or is it a flat? Is it a new build?

I notice that you are located in Inverness and whilst I would not be buying anywhere at the moment (unless it was the PERFECT deal, for the PERFECT house in the PERFECT location) I'm not too sure about property prices in Scotland. I don't think they have been as affected as ones in certain parts of England have been during the last few months.

Prices are predicted to fall even further, certainly for the rest of this calander year. As you state the rent in your boyfriends sisters flat is only £310 per month, perhaps you could stay there for the future and start saving for a deposit.

Don't forget all your legal fees which you will have to pay I'm sure so how were you going to finance these?

Don't rush into joining the property ladder, take a step back, do some research and try and save as much as you can.

Ben

moneysavinmonkey

meganross wrote: »

we will borrow about £107000.
we have no savings between us

we are renting in my boyfriend's sisters flat just now and its only costing £310 per month!!!

Irrespective of what the housing market is doing in Inverness I think you can not afford it.

You currently pay only £310 rent yet have no savings...
a £107k mortgage will cost you at least £500, probably more like £700
You will also need money money upfront for solicitors, surveys, mortgage arrangement fees...
You will also need money for furniture, property maintenance, service charges, buildings/mortgage insurance etc.
- - - - - -

It is likely that this 80% offer will be on the table for some time, so why not take some time to work out your budgets - do an SOA and see where your money is going. If you think you can afford a mortgage of £700 then start now saving the difference between that and your rent (£400) and put it into a savings account.

carolt

Only buy if it is somewhere you could see yourself living in for at least the next 10 years, or at a pinch is highly rentable (eg rent of 150% of mortgage payments minimum, to allow rental cover and charges/voids if you need to move to a BTL mortgage).

If it isn't somewhere you're SURE you'd want to stay in, don't buy, as you will almost certainly end up in negative equity within months if not years, stuck there, unable to remortgage or move.

Re the mortgage, how long is it fixed for? If prices fall (and they will - no doubt about it), then you could find it impossible to remortgage once it runs out, leaving you exposed on potentially a very high variable rate, as inflation soars.

Are your jobs inflation-proof? Are your salaries likely to rise lots in the near future, making it more affordable?

Some food for thought.

Good luck with your decision.

bubblesmoney

welcome to the board.

i dont think u would get a mortgage without a deposit. even if u did i doubt u would be able to afford it.

use the budget calculator on this website and see how much u can save a month. add that to ur rent, that would be about the amount u could afford for a mnortgage excluding other hgome owning costs.

for checking ur mortgage monthly costs see this link use the link to calculate ur outgoings. also use the same calculator to factor in additional expenses if interest rates rise, so do the same calculations for higher interest rates of 1-2% just for safety margin for the future. guess u would need atleast 800£ a month on the mortgage even if u managed to get a 100% mortgage. i dont think that is an achievable figure for u since now u spend only £310 a month on rent but dont manage to save still. buying a house without managing to save the money u will need monthly is just asking for trouble

concentrate now on saving and build a deposit. even when u do that use the budget calculator and see how much u can afford for monthly mortgage payments and then plan on buying a suitable property and rent in the meantime. best of luck

Incisor

meganross wrote: »

...My partner and i have just been offered 80% of a property through a shared ownership scheme. We don't have to rent the other 20%. The property is worth £138000 and we will borrow about £107000. We have contacted an independant mortgage advisor who has said he has found us a deal through nationwide. We have no savings between us so no deposit.

I am just beginning to worry whether now is the right time to buying somewhere?!?! We are renting in my boyfriend's sisters flat just now and its only costing £310 per month!!!

Should we hold off and wait and see what happens or should we just get on the property market?? I am 26 and he is 28 and we just think we should get our foot on the ladder!! OR should we take the property and live there for 2 yrs then sell?? We can only ever own 80%.

Sorry a bit long winded but im very confused about what the right thing to do just now is!!!

You say it is worth £138000. I bet that is the price tag, not the value. Think about having a bad winter of inflation fuel price rises and what ever, then losing your job. If you sold the place, how much would someone pay? That's it's value. The price is what you are told you need to pay to buy it. 2 different things.

You really need to understand what it's value is and what negative equity is. Do not buy any property until you understand what negative equity is and why you need savings for a good deposit.

Why should you get your foot on the property ladder? If you are saying this because this is what you hear people saying, then think again and come up with a good idea of why for yourself. Don't follow the sheep. Yes rent money is dead money, but money into property is really parrot dead money [edit: right now, anyway].

As for living there 2 years and selling, if you do that, you will understand what parrot dead money is.

CHARDONNAY_3

I am in a similar situation ( bout the same age and living with bf in a rented flat which costs approx £300 per month too) I also looked into shared ownership schemes - ownhome etc & think they have potential for the future.

However the current market is too volatile to risk moving out of a cheap rental property. Plus as you rent from family, your tenancy is more likely to be secure (e.g less chance of being evicted or facing high rent increases)

My advice would be to save (if you cant save while paying such cheap rent I doubt you will manage mortgage) Once you have a 10% deposit & cash for legal fees etc, look into scheme again. Although by then its likely you may be able to buy a place you like for around the £100,000 mark

Bf109

You dont state what type of property this is.

I sincerely hope its not a 1-bed flat, which seem to start at around the £80k mark in inverness.

wymondham

With rent at ~ £300 p/m why would anyone buy??

You sound like you have a nice place at present without needing to lose vast sums of money in a plunging housing market.. Hold fire and save a deposit for when things improve. You'll then be able to buy something bigger and cheaper than now, probably off some poor soul who did'nt understand what negative equity is...

They say rent is dead money, but buying now is far worse than this - if you rent you can walk away - with negative equity you've got your very own private prison.

FTB's need to truly understand what negative equity is.....
http://en.wikipedia.org/wiki/Negative_equity

meganross

Hi

Thanks for all your comments!! Really helpful. It is a 2bedroom flat (new build) along by the river in Inverness. There are plans to develop the area but we would only want to stay there for 2years so im thinking we will just leave it just now and SAVE!!! We could afford the mortgage, the reason we don't have savings is because we socialise too much

I will speak to my partner tonight and give him all your comments.

It just happened so fast when teh house association contacted us so its all been a bit rushed and quite stressful trying to work out the best way to go!! I work for the NHS in HR so i know my job is safe just now and my partner is a joiner and although the construction companies are laying off, his job is safe.

Thanks again for your help! x